Why quadrilateral security pact is very unlikely

Rumors abound about a quadrilateral security agreement (quad) between the US, Japan, Australia and India, after their leaders met on the sidelines of the Association of South East Asian Nations (Asean) meeting in Manila recently. Adding weight to the rumors is the fact that US President Donald Trump and his senior officials are now calling the Asia-Pacific region the Indo-Pacific, a term first used by Japanese Prime Minister Shinzo Abe in 2007.

Fearing that an increasingly powerful China will flex its muscles in the South and East China Seas and beyond, Abe proposed a “diamond of democracies” to curb China’s “ambitions.” However, there was no support for Abe’s proposal because China’s market is too lucrative and its military is too strong. As for whether Chinese “aggression” poses a threat, it depends on whom one talks to.

The West and Japan insist that China is “aggressive” in the South and East China Seas, but Beijing says otherwise

The West and Japan insist that China is “aggressive” in the South and East China Seas, but Beijing says otherwise. The “Nine Dash Line” was drawn by the Nationalist government in 1947. What’s more, the 1944 Cairo Declaration demanded that the Imperial powers return the territories they annexed before 1945 to China.

On the subject of China building a strong military, the West and Japan speculate that Beijing will use it to bully its neighbors and “flex” its muscles around the world. However, China insists that building a strong military is necessary to defend itself and protect its expanding global commercial interests.

Australia

The communist giant is Australia’s biggest trade partner. Bilateral trade between the two countries exceeds US$155 billion, with China buying over a third (over US56 billion) of Australia’s exports in 2016. Additionally, China has invested over US$30 billion in Australian industries and property, sent over 25,000 students to study in the country’s schools and universities, and over a million tourists have gone “Down Under.” Except in the minds of the anti-China crowd, the country has never threatened Australia.

To that end, joining the US in mounting “freedom of navigation and overflight operations” (FNOP) in the South China Sea is unjustified and not in Australia’s national interest. If it did participate, China-Australian trade relations could suffer. What’s more, there is no reason to believe that China would back down on its territorial claims in the South China Sea.

Japan

With respect to Japan (other than Abe and his base supporters), the majority of its population and opposition political parties did not support Abe’s “tough” China policy. Its aging and declining population and protracted deflationary period prompted many Japanese businesses to relocate production to China where the market is much larger and the costs are only a fraction of those in Japan. Toyota and other Japanese cars produced in China are destined for the Chinese market. With bilateral trade valued at over US$350 billion in 2016, China is Japan’s largest trade partner, buying between 18% and 20% of its exports each year. Chinese tourists numbering over 4.5 million in 2016 kept many Japanese businesses afloat and profitable.

Furthermore, Japan is small and its population is concentrated in a few large metropolitan regions (i.e. Tokyo and Osaka). War with China could put a large percentage of the Japanese population and a big chunk of its landmass at an unthinkable level of risk.

India

Since India was defeated by China in the 1962 war, their relations have twisted and turned. China blocking it from becoming a permanent member of the UN Security Council and Nuclear Suppliers Group, helping Pakistan to build the China Pakistan Economic Corridor (CPEC) running through the disputed Kashmir region, and territorial disputes have soured the Indo-China relationship. But both countries belong to the BRICS (Brazil, Russia, India, China and South Africa) club and the Shanghai Cooperation Organization, both of which were established to advance their member countries’ interests.

India might also be unable to counter China. Although it has been hailed in the West as the next “economic superpower,” one that might be able to overtake China, India remains an impoverished nation whose GDP as a percentage of that of the world is less than what it was at the time of independence in 1947 – less than 4%. According to the World Bank, almost 60% of Indians are impoverished, living under US$3.10 per day, the new poverty income threshold. Its youth unemployment rate is over 30%. The Indian economy is stalling; annual growth has declined from 7.4% in 2016 to around 5.5% in the first half of 2017. Its miraculous growth from 5.4% to 7.4% in 2015 was suspect, as it was derived from a change in calculating GDP and the base year. In that period, bank loans and industrial and agricultural production actually decreased.

India needs a huge amount of investment to build infrastructure, the lack of which is a major impediment to its economic development. With its deep pockets, infrastructure construction expertise and manufacturing prowess, China could help build the country’s infrastructure and achieve Prime Minister Narendra Modi’s “Made in India” policy goals. The Chinese government owns the country’s biggest infrastructure-building enterprises and banks, enabling it to invest in India. In the US, Japan and Australia, investment decisions belong to private investors, not their governments. Other than a few high-profile investments (i.e high-speed railway construction with Japan and the US’ s Amazon), not many private firms are knocking on India’s door.

The United States

The American and Chinese economies are increasingly intertwined – they were each other’s biggest trade partner in 2016 (US$580 billion). US enterprises are increasingly using China as their “factory” and market. One-quarter of Boeing’s commercial airplanes are sold to Chinese airlines, prompting the company to build production facilities in China.

The benefits of a US-China cooperative relationship could be huge in light of the over US$250 billion in business deals that President Donald Trump brought back from his two-day state visit to the country this month, although some in the US have downplayed and ridiculed it, calling it a “publicity stunt.” However, the criticism is unfair. The deals were, of course, negotiated and signed beforehand. Business deals require time to hammer out. No business deals can materialize unless both sides expect to profit. No matter how or when the deals were signed or whether they will materialize, it is almost twice the current value of US exports to China.

In light of the above, the four countries might have made the right decision not to form a quadrilateral security agreement.

Forming a quad makes less sense today

Forming a quad makes even less sense today for a number of reasons. One, China is much stronger militarily than it was a decade ago. Two, over 50% of Americans and Australians do not consider China a threat, according to the Australia-based Lowy Institute and US-based Pew Poll. Three, China promotes bilateral negotiations between the claimants and joint development to exploit the region’s resources, suggesting it is not threatening any nation, including the US, Australia, Japan and India.

Finally, the claimant nations – the Philippines, Malaysia, Vietnam and China – agree to resolve the issues themselves. They and the Asean states are negotiating a code of conduct in the South China Sea. In this regard, there is no reason for the four external powers to form a quad to contain China’s “aggression” in the South China Sea.

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Ken Moak taught economic theory, public policy and globalization at university level for 33 years. He co-authored a book titled China's Economic Rise and Its Global Impact in 2015. HIs second book, Developed Nations and the Economic Impact of Globalization, was just published by Palgrave McMillan Springer.